China’s government last month reported 0.4 percent economic growth in the second quarter of 2022, the country’s second-worst quarterly performance in three decades.

That data has implications for the health of more than just China’s own economy. A slowdown there could well infect closely connected economies near and far.

Eurasianet turned to three economy and finance experts in Kazakhstan to ask what the Chinese slowdown might mean for their country.

Ramazan Dossov, lead analyst at the Association of Financiers of Kazakhstan

Q: What are the consequences of the economic slowdown in China for Kazakhstan?

A: The main area of influence might be in the potential decrease in demand for natural resources supplied by Kazakhstan. So, for example, in 2021, China was the largest importer of goods from Kazakhstan (16.4 percent of all exports that year), followed by Italy (14.7 percent) and Russia (11.5 percent). In monetary terms, our country earned $9.9 billion from the export of goods to China. The main exports to China are oil (51.6 percent), copper (4.7 percent), uranium (2.9 percent) and other minerals. 

Since the start of this year, prices for natural resources have grown significantly, which implies a serious increase in earnings from their exports, including from China. According to preliminary data from the Bureau of Statistics, in January-May 2022, Kazakhstan’s total revenues from the export of goods increased by a record 60 percent and amounted to $34.2 billion.

Q: Could the Chinese consequences be potentially worse for Kazakhstan than the economic downturn in Russia? Or is it not so serious?

A: For a start, China’s fiscal bodies, along with the People's Bank of China, possess far greater avenues for supporting their domestic economy than Russia under sanctions. Cash reserves at the Chinese central bank at the moment stand at around $3.1 trillion, making them the largest in the world.

China has a far more diversified economy, supported both by strong integration of the domestic industrial sector into global production chains and by virtue of a robust and growing domestic demand for goods and services.

Under conditions like those, it is hardly surprising that the average annual growth rate of China's gross domestic product over the past 10 years has been 6.7 percent. And thanks to this, the share of China in the global economy has grown from 11.4 percent in 2012 to more than 18 percent in 2021. For comparison, the average annual GDP growth rate in Russia over the past 10 years has been below 1 percent. Against that background, Russia’s share in the world economy has fallen from 3.6 percent to 3.1 percent.

As a result of existing relations, though, such through structures like the Eurasian Economic Union [trade bloc], Kazakhstan’s economy is more deeply integrated with that of Russia than China’s. Russia’s share in our trade turnover is 24.2 percent, for China it is 17.7 percent.

So, the situation is that the Chinese authorities have a significant arsenal of measures to support their domestic economy if necessary. But accordingly, a potential slowdown in the Chinese economy may have a much smaller impact than the situation in the Russian economy will.

Aidar Alibaev, economist, former chairman of the Association of Pension Funds of Kazakhstan

Q: Should Kazakhstan be worried about an economic slowdown in China?

A: The idea of economic slowdown is a broad concept that disguises a number of dynamics within specific industries within China. And with that said, to go by the data on oil and gas consumption in our neighbor, there are few grounds for talking about a serious deterioration in the situation.

Yes, there is a slight drawdown in the construction industry, the demand for housing has fallen. Same thing with automobiles. We see a substantial level of debt among the population. But this is not critical. Those are the small drops in demand in some industries that we see affecting the pendulum motion in the economy. Overall, the Chinese economy is doing fine right now.

As a result, Kazakhstan will not feel any impact on its economy. What you have to understand is that our consumer demand relative to the size of the Chinese economy is too small for us to see any consequences. 

We usually create our own economic problems by constantly stepping on the same rake. That’s the problem of total corruption in the customs services, which are under the control of high-ranking officials and people close to the former president. You only have to take the discrepancy in official customs declaration data from China and Kazakhstan.

This difference ranges in the billions of dollars, all of which end up in the pockets of our corrupt officials. This is a reflection of the entire system of corruption in Kazakhstan.

Q: So is Russia a more important factor?

A: The impact of anti-Russia sanctions is really being felt. We have seen a reduction in imports of both food and non-food goods from Russia. Russia has been the main supplier of Kazakhstan’s imports. After the Russian government banned the export of certain key foodstuffs, we saw an acute shortage of sugar in Kazakhstan, which can only provide for 10 percent of its domestic sugar consumption.

These unprecedented sanctions against Russia have yet to make themselves felt. The consequences for us will begin to really be felt in the fall. Now the situation is mitigated by the summer season, when we have an abundance of fruit and vegetables.

The situation is aggravated by the fact that a large proportion of the goods imported to Kazakhstan from Russia used to come from Europe. This influx has stopped, our business people involved in the supply of these goods are looking for workarounds. This entails longer routes, difficult logistics, and rising prices.

In addition, rental housing in Kazakhstan has grown significantly, especially in large cities, against the background of the mass relocation of Russians to our country. This affects inflation, social tension, which may eventually result in social explosions.

Rasul Rysmambetov, economist and financial analyst

Q: What’s the impact of the slowdown in the Chinese economy on Kazakhstan?

A: A slowdown in China's economic growth means falling prices for oil, Kazakhstan's main export. But that fall is unlikely to be significant, because the rise in oil prices has been influenced not by the Chinese factor, but by the war in Ukraine and Western sanctions against Russia.

We have a significant trade turnover with China, by the standards of Kazakhstan, but at the same time, we are not cooperating with China on such a large scale as to feel serious consequences. Most of the economic interaction between the two countries is outside of those sectors that have shown negative performance. And the very dynamics of the neighbor's deceleration is not significant for us to feel something. For our trade with China to suffer, they must have much larger economic problems.